THE FRONTIER OF SOYBEAN DEVELOPMENT POLICY

Dewa Ketut Sadra Swastika

Pusat Penelitian dan Pengembangan Sosial Ekonomi Pertanian, Jl. A. Yani 70 Bogor

INTRODUCTION

Soybean is the third important food crops after rice and maize. It is a

source of healthy vegetable protein. The FAO data showed that per capita

consumption of soybean (equivalent dry grain) was decreasing from about 11.38

kg/capita in 1990 to about 8.97 kg/capita in 2004. Nevertheless, the total domestic

demand is continuously increasing due to both the food industry and population

growths. On the other hands, its production was declining, hence soybean deficit

is estimated to steadily increasing. For example, the domestic demand for soybean

in 2004 was about 2.02 million tons, while its production was only 0.71 million

tons. This condition will likely be continue to happen. In other words, Indonesia

will be continuously dependent upon import.

Historically, Indonesia was self sufficient in soybean until 1974, with the

sufficiency indices higher than one (Swastika, 1997). After that, Indonesia has

become an importing country on soybean, although production was increasing

until 1992. The area planted to soybean and production reached their peaks in

1992 about 1.67 million ha and 1.87 million tons, respectively. Since then, the

area and production continuously declining. There should be some breakthroughs

in order to lowering the dependency of Indonesia on soybean import.

This paper is aimed to describe the past and current status of soybean

supply and demand as well as the prospect of soybean development. Another

objective is to propose an alternative of policy direction to develop soybean

production system.

DOMESTIC PRODUCTION AND CONSUMPTION

Area and Production of Soybean During the last 35 years (1969-2004), area planted to soybean was

fluctuated. It was increasing from about 0.554 million ha in 1969 to its peak about

1.665 million ha in 1992, and then sharply declined to only 0.550 million ha in

2004 (Table 1). Some factors might caused the decline in soybean area, such as

low price of imported soybean, and competition among secondary food crops in

terms of land use. Without import tariff, the price of imported soybean was lower

than that of domestically produced soybean. As shown in Table 2, that the price

THE FRONTIER OF SOYBEAN DEVELOPMENT POLICY Dewa Ketut Sadra Swastika

–0.02 percent per year.

6.05

6.98

7.49

10.01

8.08

0.55 1989-1997 -0.85

1.25

0.39

2.42

8.79

3.54 1997-1999 1.42 -0.46

4.32

0.95

16.63

45.33

45.38

24.65 1999-2004 -13.73 1.36 -12.56 -5.57

0.11

0.08

5.98 Avg growth -0.02

1.74

1.72 5.14 9.99 c 8.33 c 4.35 c Source: CAS various years, and FAO 2004.

2.55

5.59 8.53 - - - 1979-1989

Analisis Kebijakan Pertanian. Volume 3 No. 2, Juni 2005 : 133-140

ratio between imported soybeans and domestically produced soybeans during the

last decade (1992-2002) always less than one, although tended to increase. The

lower price of imported soybean have encouraged increasing import of soybean.

% Net Import d) 1969 554

As a result, price of domestically produced soybean was declining. This situation

discouraged farmers to grow soybean.

Compared to maize (as one of competitive crop), maize price tended to

increase at a low rate (0.98%/year), while soybeans price tended to decline by 3.21

percent per year during the same period. This phenomenon indicated that there

was an increasing trend of maize competitiveness relative to that of soybean.

The study of Gonzales et al. (1993) showed that soybean was less

competitive compared to maize. The study of Ramli and Swastika (2005) reported

that soybean in Central Kalimantan was less competitive compared to other

secondary crops such as maize, peanuts and sweet potato. Hence, farmers tend to

grow other secondary crops since they are more competitive rather than soybean.

Therefore, area planted to soybean tends to decline. As shown in Tabel 1, the

average growth of area planted to soybean for the last 15 years was

Tabel 1. Soybean Production and Consumption Balance in Indonesia, 1969-2004 Year

Area (000 ha)

Yield (t/ha)

Production (000 t)

Consumption (000 t)

Balance (000 t)

Net Import (000 t)

0.70 389 349 40 -1 - 1974 768 0.77 589 526 63 -4 - 1979 785 0.85 670 791 -121 177

1.97

22.38 1984 859 0.90 770 1064 -294 400

37.59 1989 1198 1.10 1315 1629 -314 385

23.63 1992 a 1665 1.12 1870 2560 -690 690

26.95 1994 1407 1.11 1565 2365 -800 800

33.83 1997 b 1119 1.21 1357 1973 -616 616

31.22 1999 1151 1.20 1383 2684 -1301 1302

48.51 2001 679 1.22 827 1960 -1133 1135

57.91 2004 550 1.29 707 2015 -1308 1307

64.86 Growth 1969-1979

3.55

Note: a = peak year; b = economic crisis; c = 1979-2004 period; d) percentage w.r.t. domestic consumption

Similarly to area, the total national soybean production was also

fluctuating, and reached its peak about 1.87 million tons in 1992. After then, the

national production sharply declined to about 0.71 million tons in 2004. However,

in general it was growing at a rate of 1.72 percent per year during the period of

1969-2004, due to yield growth of 1.74 percent per annum.

Table 2. Prices of Soybean and Maize in Indonesia, 1991-2002.

1) 1) 2)

Price Ratios Domestic Soy Maize Imported Soy

Year (Rp/kg) (Rp/kg) (Rp/kg)

Maize/Soy Imp/Dom (1) (2) (3) (4) (3)/(2) (4)/(2) 1991 493 143 -

0.29 - 1992 454 126 276

0.28

0.61 1993 484 133 278

0.27

0.57 1994 515 158 296

0.31

0.57 1995 472 164 286

0.35

0.61 1996 476 185 303

0.39

0.64 1997 337 123 239

0.36

0.71 1998 330 117 290

0.35

0.88 1999 321 132 234

0.41

0.73 2000 277 114 223

0.41

0.81 2001 324 150 230

0.46

0.71 2002 344 159 298

0.46

0.87

-3,21 0,98

0.75 1) 2) Source: FAO, 2005; Ditjentan, 2004.

Consumption Almost all of soybean (about 94%) in Indonesia is consumed as processed

food, consists of fermented and non-fermented products (Swastika et al., 2005).

Among fermented products are tempe, soy-sauce, tauco, etc, and the non-

fermented products are tofu, soy-milk, soy-oil, snacks, etc. The soybean meal is

used for feed, which occupy about 15-20 percent of feed ingredient (Tangendjaja

et al. , 2003).

The rapid development of food and feed industries in line with population

growth, have resulted into an increase in demand for soybean. For the last 15

years, soybean consumption increased from 0.35 million tons in 1969 to about

2.02 million tons in 2004, or it grew at a rate of 5.14 percent per annum. This high

growth of demand could not followed by its domestic production. Therefore,

Indonesia is continuously importing soybean from the world market to cover the

deficit. As shown in Table 1, that the net import was increasing from 0.18 million

tons in 1979 to about 1.31 million tons in 2004, or it grew at a rate of 8.33 percent

THE FRONTIER OF SOYBEAN DEVELOPMENT POLICY Dewa Ketut Sadra Swastika

per year. Currently, the net import of soybean was about 65 percent to the total

domestic demand. On the other hands, soybean meal for feed industry was fully

imported.

SOYBEAN DEVELOPMENT POLICY

There is an interesting lesson to learn from the past and current status of

soybean production and consumption. It seems that Indonesia in the short and

medium terms will not be able to achieve self-sufficiency, although it was

obtained before 1975. It is very hard to get back the area planted to soybean more

than 1 million ha per year, since in 2004 it was only 0.55 million ha. Similarly, it

is also very hard to attain the average yield more than 1.5 tons per ha, since the use

of good quality (certified) seed is very limited. Singh (1995) in Nugraha (1996)

reported that the use of certified soybean seed in Indonesia was only about 2

percent. Furthermore, Seed Directorate in Siregar (1999) reported that the use of

certified soybean seed during 1984-1996 was about 6 percent on average,

consisted of blue and orange labels. That is one among other reasons, why the

national average yield and production of soybean at national level is still low. On

the other hands, the demand for soybean in 2004 was 2.02 million tons, and tends

to increase in the future.

By using the prices and income elasticities resulted from the study of

Simatupang et al. (2003), combining with population growth, the projected per

capita consumption and total domestic demand for soybean is as depicted in Tabel

As shown in Table 3, the demand for soybean will be increasing from

about 2.12 million tons in 2005 to about 2.41 million tons in 2010 and 3.02

million tons in 2020. Let assume that Indonesia needs about 2.5 million tons of

maize on average, and an intensive introduction of high yielding varieties resulting

into national average yield of 1.5 ton/ha. In this scenario, the area planted to

soybean should reach 1.67 million ha, or similar to area in 1992. How to increase

area from 0.55 million ha to 1.67 million ha or three times compared to current

existing area, is a big question. So that, forcing the program to produce soybean at

all cost to obtain self sufficiency is seems to be unrealistic.

The more realistic and applicable policy is reducing import to a certain

level based on the available resources. The scenario to reduce import from 65

percent to 40 percent is seems to be more realistic, and it is a frontier target of

policy that obtainable. This target is still hard to achieve. There should be some

strategic policy to attain this goal.

Analisis Kebijakan Pertanian. Volume 3 No. 2, Juni 2005 : 133-140

THE FRONTIER OF SOYBEAN DEVELOPMENT POLICY Dewa Ketut Sadra Swastika

Table 3. The Projected Demand for Soybean in Indonesia, 2005-2020 Year

Per capita consumption (Kg/cap/yr)

Population (000 people)

Pop. Growth (%)

Total Consumption

(000 tons) 2005 9.29 228,480 1.61 2,124 2006 9.39 232,090 1.58 2,179 2007 9.48 235,687 1.55 2,235 2008 9.58 239,270 1.52 2,291 2009 9.67 242,835 1.49 2,349 2010 9.77 246,380 1.46 2,407 2011 9.87 249,903 1.43 2,466 2012 9.97 253,402 1.40 2,525 2013 10.07 256,874 1.37 2,585 2014 10.17 260,316 1.34 2,646 2015 10.27 263,726 1.31 2,708 2016 10.37 267,102 1.28 2,770 2017 10.47 270,440 1.25 2,833 2018 10.58 273,740 1.22 2,896 2019 10.68 276,997 1.19 2,960 2020 10.79 280,210 1.16 3,024

The Directorate General of Food Crops (2005) targeted the growth of

soybean production by 7 percent per year. By using this growth scenario, the 60

percent domestic production or 40 percent import will be achieved in 2017, where

production is projected to reach 1.70 million tons, while consumption is projected

to be 2.88 million tons (Table 4).

The next question is how to achieve this particular production growth?

There are two strategic policy to obtain this target, i.e. yield improvement and area

expansion. The yield improvement should be done through intensive research and

development, in order to create the new high yielding varieties (HYVs). During

the 2001-1004 period, at least 11 HYVs have been released by the Indonesian

Centre for Food Crops Research and Development (ICFORD), and another two

HYVs released by other institutions, as shown in Table 5. In fact, most of area

planted to soybean (70%) have used HYVs (Siregar, 1999). However, due to

improper quality of seed, the average yield is still low.

The promotion of the use of good quality seed of HYVs should be done

through improvement of seed industry and extension activities. There should be a

strategic policy to encourage seed growers to improve their business in soybean

seed production. Another effort is to improve the extension services, especially

regarding the importance and advantages of using good quality seed. These efforts

should be followed by the improvement of good seed distribution to the farmers.

–2004) High Yielding Varieties of Soybean in Indonesia Varieties Yield potl

9. Nanti

5. Panderman

2.5

85 Large Low-land

6. Ijen

2.5

85 Medium Low-land, tolerant to UG*

7. Tanggamus

2.7

88 Medium Dry-land

8. Sibayak

2.5

89 Medium Dry-land

2.5

91 Medium Dry-land

10. Ratai

2.6

90 Medium Dry-land

11. Seulawah

2.7

90 Medium Dry-land

12. Merubetiri

2.7

95 Medium Dry-land

13. Baluran

3.0

87 Large Low-land

4. Mahameru

Analisis Kebijakan Pertanian. Volume 3 No. 2, Juni 2005 : 133-140

31.02 Growth (%/yr)

Table 4. Projected Production and Consumption of Soybean in Indonesia, 2005-2020 (Scenario 7% production growth)

Year Dom. Production

(000 t) Dom. Demand

(000 t) Surplus/Deficit

(000 t) % Deficit or

Import (%) 2005 756 2124 -1368

64.41 2006 809 2179 -1370 62.88 2007 866 2235 -1369 61.27 2008 926 2291 -1365 59.58 2009 991 2349 -1358 57.81 2010 1060 2407 -1347 55.95 2011 1135 2466 -1331 53.99 2012 1214 2525 -1311 51.92 2013 1299 2585 -1286 49.75 2014 1390 2646 -1256 47.47 2015 1487 2708 -1221 45.08 2016 1591 2770 -1179

42.55

2017 1703 2833 -1130

39.90

2018 1822 2896 -1074

37.09 2019 1949 2960 -1011 34.14 2020 2086 3024 -938

7.00 2.38 -2.48 -4.75

85 Large Low-land

Table 5. The Newly Released (2001

(t/ha) Maturity

(days) Grain size

Adaptable to

1. Sinabung

2.5

88 Medium Low-land

2. Kaba

2.6

85 Medium Low-land

3. Anjasmoro

2.5

80 Medium Dry-land Source : ICFORD. 2004. *UG=Army-worm The area expansion on the other hands, should be done through

improvement of cropping intensity on irrigated lowland, rain-fed lowland and

upland, as well as the use of idle land that potential for soybean cultivation. The

location quotient (LQ) could be used as an indicator to find out the suitable land

for soybean cultivation, for both improvement of cropping intensity and the use of

idle land. Based on this indicator, Yogyakarta, East Java, NTB, Aceh, Lampung,

West Java, Central Java, and South Sulawesi are the provinces where area

expansion for soybean production could be promoted. These provinces are

currently the main production area of soybean.

To support those above strategy, there should be some police efforts, such as:

(1) Provide seed growers, soybean farmers, and small industry (who use soybean

as a raw material) with a soft and simple procedure credit.

(2) Speeding up transfer of technology in seed production as well as soybean

farming by revitalizing extension services and farmers field training.

(3) Macro policy, i.e imposing import tariff in order to give an incentive for the

farmers to grow soybean.

(4) Provide farmers and other businessmen in agriculture with sufficient

infrastructures in order to create a good and efficient agribusiness system.

(5) Promote more research on development of new high yielding varieties of

soybean, suitable for some agro-ecosystem and tolerant to some biotic and non-biotic stresses.

CONCLUSIONS AND POLICY IMPLICATIONS

From the above discussion, there are some following conclusions and policy implication can be drawn.

1. Based on the past and current status of soybean production and consumption,

it seems unrealistic to expect Indonesia achieving self sufficient on soybean in the short and medium terms. Reducing import from about 65 percent to about 40 percent is likely the more applicable as the frontier of policy on soybean production development in the medium even the long terms.

2. In order to reduce the share of soybean import to the total domestic demand,

two strategic policy should be taken, i.e: (i) yield improvement through R & D as well as technology dissemination through extension and farmers training; and (ii) area expansion through increase in cropping intensity and the use of idle land suitable for soybean cultivation.

THE FRONTIER OF SOYBEAN DEVELOPMENT POLICY Dewa Ketut Sadra Swastika

3. To encourage farmers to grow more soybean with a good quality of seed, there

should be some policy efforts, such as: provide incentives for seed growers, soybean farmers, and small industry, by imposing import tariff and providing them with soft and simple procedure credit.

4. To promote a well running of agribusiness, the agricultural development should be supported by the development of infrastructures in rural areas.

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THE FRONTIER OF SOYBEAN DEVELOPMENT POLICY